Question

7. Olu, a sole trader has the following financial details for the year ended 31st December, 2016:
Cash Book Summary: Balance b/d 6,000; Sales 10,000; Debtors 20,000; Creditors 12,000; Salaries 5,000; Rent and rates 4,000; Insurance 1,000; Balance c/d 14,000.
Additional info (1 Jan / 31 Dec 2016): Stock 4,000/2,000; Land and building 15,000/15,000; Motor vehicle 6,000/4,000; Debtors 2,000/3,000; Creditors 1,000/500; Insurance owing 2,000/6,000.
You are required to prepare: (a) Statement of affairs as at 1st January, 2016; (b) Trading, Profit and Loss Account for the year ended 31st December, 2016 and a Balance Sheet as at that date.

Accepted Answer

(a) Statement of Affairs as at 1 Jan 2016: Assets — Cash 6,000, Stock 4,000, Land and building 15,000, Motor vehicle 6,000, Debtors 2,000 = 33,000. Less liabilities — Creditors 1,000, Insurance owing 2,000 = 3,000. Opening capital = 33,000−3,000 = N30,000.
(b) Trading, Profit and Loss Account: Sales N31,000 (cash sales + credit sales), less Cost of goods sold (Stock 4,000+Purchases 11,500−Stock 2,000=13,500) = Gross Profit N17,500. Less expenses: Salaries 5,000, Rent and rates 4,000+, Insurance 5,000, Depreciation on motor vehicle 2,000 = Net Profit N1,500. Balance sheet totals are prepared using the closing asset and liability figures given.

WAEC Accounting 2018 Theory — Question 7

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